The Fiscal Boomerang: A Comprehensive Analysis of the VAT Reform on Indonesia’s Coal Sector and the 2025 Refund Crisis

Indonesia’s 2021 VAT reform reclassified coal as a taxable good, aiming to align with global neutrality principles but inadvertently triggering a massive, sustained surge in VAT refunds. The author in this article examines the resulting fiscal shock by analysing the legal conflicts with existing Perjanjian Karya Pengusahaan Pertambangan Batubara (Coal Contracts of Work) and the economic mechanics of the sector’s inverted duty structure. Drawing on comparative jurisprudence, the author offers targeted policy recommendations to mitigate state revenue erosion while preserving the fundamental principles of VAT neutrality.